In the Region/New Jersey

Huge 16-Year Smithville Project Under Way Again

By RACHELLE GARBARINE

Published: May 4, 1997

FOR the last 16 years, construction has been on-again, off-again at the huge mixed-use project in the Towne of Historic Smithville, a rural enclave in Galloway Township in Atlantic County 11 miles northwest of Atlantic City.

Construction delays were first caused by a dispute with environmentalists concerning the 2,200-acre site, which borders a national wildlife refuge and contains streams and wetlands. A lawsuit resulting in compromise in 1986 with a new ownership resolved this matter. In 1991, the recession stalled construction, pushing the owner into default and three years later lenders holding portions of a $25 million mortgage took the unfinished project in lieu of foreclosure.

Now the development's residential component -- once planned for 6,800 units then whittled down to 4,000, of which fewer than 1,600 were built or started -- is moving forward. But it will have a different mix, including housing for active adults, fewer units and a new owner -- K. Hovnanian Enterprises of Red Bank, the state's largest builder. The project's revival is the result of three years of discussions on how to proceed with development of the site. The negotiations involved Hovnanian, the lenders, local, state and county officials, a coalition of state and national environmentalists, and resident homeowners.

Agreements have been reached, or are being completed, to meet the concerns of each group. All say they are hopeful the project will be completed and they will get what they were promised. The site surrounds the town center, a collection of 18th-century buildings refashioned into speciality shops and restaurants. Hovnanian will buy the land in sections from Galloway Holding Company, the entity created by the lenders to sell the site. They include Core State, NatWest and First Union.

''Combining our interests was the best way to recoup as much of the face value of the mortgage'' as possible, said Carl Goldberg, partner of Starbare Associates, an affiliate of Roseland Property Company, a Roseland developer. Starbare took over part of the Smithville site when it bought a pool of distressed properties from NatWest in 1993. Neither side would disclose the sales price. But industry professionals put it at about $10 million.

Under a township approved development plan Hovnanian will build 2,000 residences instead of the remaining 2,500 units that could have been built by the previous developer, a subsidiary of the Patt Organization of Hollidaysburg, Pa. At least 30 percent of the units will be part of a community that offers people 55 and over in their retirement or preretirement years recreation, socializing and someone else to do the outside maintenance. The rest of the residential component will have no age restrictions.

Ara Hovnanian, president of Hovnanian Enterprises, said his company had purchased the property because of its ''appealing price'' and location, near Atlantic City and the shore. With Atlantic City ''seeing renewed interest, the timing was also good,'' he said. He was referring to the $7 billion in public and private investment planned or under way there, including the tripling of casino hotel rooms to 27,000.

Mr. Hovnanian said that having the flexibility to do both age-restricted and other housing would support so large a project, now called K. Hovnanian's Four Seasons at Historic Smithville.

The project will be the fifth active-adult community in the state for Hovnanian, and others are planned. Some 417 age-restricted units, including both detached and town houses, are expected to be completed through 1998. The estimated value of the entire project, which will be built over the next 10 years, is $300 million, said Robert H. Karen, president of the shore area region for Hovnanian.

The development is helped by signs that the market for active-adult housing in the state is strong. Among the reasons are an aging population and a healthy resale market, which enables buyers over 55 to sell their existing homes, industry analysts said.

There is also the continuing trend nationally for people to retire close to their family and friends. And William E. Becker, a Teaneck-based consultant specializing in housing for the elderly, noted a recent trend within New Jersey to build active-adult communities outside of their traditional sites, such as Ocean County, long a magnet for such housing. He said eight projects were being planned throughout the state that could produce 6,000 units over the next two years.

GETTING the Smithville project to this point was not easy since the number of groups and issues involved complicated negotiations over its future. ''It was like nailing Jello to a wall,'' said Lewis S. Kurland, Hovnanian's attorney.

Under the agreement being worked out with homeowners the company will build the promised, but never delivered, recreational amenities and road improvements, make repairs to existing structures and tear down the 60 incomplete units that have been hurt by time and neglect. And it, along with the banks, will turn over control of the housing management to resident homeowners sooner than required.